ING keen on China, HK property stocks

Investors should be overweight on Chinese and Hong Kong property plays, as China's efforts to cool the sector are more than offset by strong long-term growth prospects, an ING Groep fund manager said yesterday.

But Japanese and Australian property stocks, and real estate investment trusts (Reits), should be approached with caution, given rising Australian interest rates and Japan's worsening economic sentiment, added ING's Justin Pica.

'Probably our strongest story in terms of our conviction over the medium term is the China real estate story. . .strong personal income growth, the urbanisation and industrialisation demand, and also lack of alternative investments,' he told a media briefing in Hong Kong.

'The government of China implemented specific cooling measures to clearly control an overheated market. We think those cooling measures have worked and in general will be positive for the market over the longer term.'

Mr Pica said that a share price slide by Chinese developers, by as much as 50 per cent since the end of October, had left some trading at 30 to 40 per cent discounts to net asset value.

The fund manager, part of a team that manages more than US$2 billion in Asia Pacific real estate assets, spoke as the Dutch financial services group launched the ING Asia Pacific Real Estate Securities Fund in Hong Kong.

ING established the fund internally in September, investing cash from its insurance operations. Mr Pica said since then it has outperformed its benchmark, the FTSE EPRA/NAREIT Asia Index, by more than 300 basis points.

While the fund is initially being offered to Hong Kong retail investors and private banking clients in Singapore, ING plans to roll it out into other markets in Asia. ING officials said they expect the fund to raise at least US$200-US$300 million within the first six to 12 months.

Mr Pica, the fund's manager, said some of its top holdings included Hong Kong-listed China Overseas Land & Investment Ltd and China Resources Land Ltd, as well as Sun Hung Kai Properties Ltd and Hang Lung Properties Ltd.

The Hong Kong-based manager said the fund also holds Singapore-listed Reits CapitaMall Trust and CapitaCommercial Trust. - Reuters

Source : Business Times - 26 Feb 2008